The sharing economy could be a solution to a global problem

The Sharing Economy - a movement based on the sharing of under-utilised assets - has grown enormously over the last decade. We’ve looked at what the sharing economy is, and the impressive growth of some of the industry’s champions (like Airbnb and Lending Club), but we haven’t yet asked a crucial question.

Why?

What’s driving the massive interest in a sector which was almost non-existent only a decade ago?

The answer is, of course, complex. But here’s one important part of it: the Sharing Economy has the power to solve a significant global problem.

The Problem: humans aren’t good at thinking about the long term

We humans have a tendency to do what’s in our best interests in the short term, even if it’s detrimental to us in the long term. It’s a trend evidenced by an economic theory known as the tragedy of the commons, where such behaviour results in the eventual (and seemingly inevitable) depletion of shared finite resources (i.e., the “commons”). It’s a theory that’s often been used to evidence a significant flaw in capitalism.

The unfortunate tragedy is that much of the time, what’s best for us in the short term and what’s best for society in the long run are mutually exclusive things.

Deforestation, over-fishing and global warming are all examples of this effect in action, but population growth is an increasingly relevant example.

Our planet and its resources are the greatest commons of all, and the exponential growth of human population puts significant strain on those finite resources.

How can the Sharing Economy help us avoid the tragedy of the commons?

The Solution: Make what’s best for everyone in the long term best for us in the short term, too.

How has the Sharing Economy made the two mutually inclusive? Rachel Botsman, a long time commentator on the industry suggests that the Sharing Economy's growth is due to a combination of four well-timed factors:

Tech innovation has enabled the creation of scaleable and secure platforms that allow individuals to connect and share under-utilised goods on an unprecedented scale.

Values have shifted, and the true cost of possessions, relative to the value they add to our lives, has become increasingly important.

Economic realities in the aftermath of the global financial crisis have resulted in many suddenly un- or under-employed people needing to find new or additional sources of income.

Environmental pressures are driving a growing need to minimise our impact on the mother of all commons - our planet. These pressures, largely symptomatic of population density, have also resulted in more people living in smaller spaces and requiring greater access to common goods - like public transport.

Here’s a real world example:

For a person living in the inner city who walks to work and largely uses a car only on weekends, is it worth owning one? The economic, environmental and value driven logic would likely skew the answer towards “no”, but it’s not until convenience comes into play that people will really trend towards getting rid of their cars - and that’s where tech innovation makes the difference. When car-sharing networks can guarantee an available car within a 300m radius, and services like Uber only a 3 minute wait, that’s when the game changes.

In short:

The reality is that human behaviour is hard, if not impossible to change on a massive scale. The sharing economy understands that humans aren’t that good at prioritising communal long term benefits over personal short term ones - and that as long as these are mutually exclusive, change won’t occur on a mass scale.

The Sharing Economy attempts to make the two mutually inclusive, taking what’s best for community as a whole on the long term, and applying short term personal benefit logic: If I’m going to use a car sharing network instead of owning a car, it has to be easy, reliable, affordable, and must suit my lifestyle and environment.

Harmoney Limited (FSP373486) is licensed to provide a peer to
peer lending service under Part 6 of the Financial Markets
Conduct Act, 2013. The conditions of the licence imposed by
the Financial Markets Authority are published on
www.fspr.govt.nz.

$500.00 platform fee. Fixed rates range from 9.99% p.a. to 39.99%. p.a. on 36 to 60 month terms, with no early repayment penalties.